U.S. Federal Reserve keeps rates steady amid tariff uncertainty

Federal Reserve officials held onto their key interest rate yet again on Wednesday, but they still foresee two rate cuts by the end of the year.

Moon Ji-young tells us more.

The U.S. Federal Reserve kept its key rate unchanged for the fourth straight meeting Wednesday and lowered the country's economic growth outlook.

This keeps the rate in the 4-point-two-five to 4-point-five percent range and marks the fourth consecutive rate freeze since Trump took office, despite pressure to make cuts.

"What we're waiting for to reduce rates is to understand what will happen with, really, the tariff inflation. And there's a lot of uncertainty about that."

So far, inflation has remained relatively tame, near the Fed's target of 2 percent.

However, economists warn it may take months for the effects of tariffs to be felt.

Inflation has also seen recent upward pressure from rising oil prices driven by the conflict between Israel and Iran.

However, Fed officials still foresee two interest rate cuts by the end of this year, the same as they projected in March.

The central bank's latest quarterly projections show noticeably weaker growth, higher inflation, and slightly higher unemployment by the end of this year, than it had forecast in March.

For this year, Fed officials expect inflation to rise to 3 percent, unemployment to increase to 4-point-5 percent, and growth to slow to 1-point-4 percent.

The Fed also projects GDP to grow by 1-point-4 percent in 2025, down from 1-point-7 percent projected in March.

"Following growth of 2.5% last year, GDP was reported to have edged down in the first quarter, reflecting swings in net exports that were driven by businesses bringing in imports ahead of potential tariffs."

President Donald Trump has publicly criticized Powell for not cutting rates, increasing pressure on the central bank. But the Fed Chairman dismissed criticism, saying "we're in a good place."

Meanwhile, this week's decision puts the benchmark rate gap between South Korea and the U.S. at up to 2 percentage points with the Bank of Korea slashing its key rate to 2-point-5 percent in its last meeting in May.

On the same day, Bank of Korea Deputy Governor Park Jong-woo noted the Fed Chairman's cautious policy approach, influenced by U.S. tariff policy and divergent views among officials.

Speaking at a meeting on macroeconomic issues,

he also highlighted the growing uncertainty regarding the future path of U.S. monetary policy.

Moon Ji-young, Arirang News.